Vedant Fashions Ltd

The Company remains eommitted to GraduatinG beyond ‘Some Indian wear in a wardrobe' to ‘Only Indian wear in every wardrobe.'

OverView

?t Vedant Fashions, we are driven by the prospeet of putting Indian wear in every Indian wardrobe.

This will warrant a life-eonsuming pursuit of exeellenee. India is the world's largest market by population; the population is growing annually larger than what is our eapaeity to serviee; within this population spread even the additional purehase of a single Indian wear item by eaeh Indian eould eonsiderably widen the industry's spaee, seope and relevanee.

In view of this, our challenge is not finding eustomers; our challenge is to design and make responsibly with the objeetive of ereating the markets of the future and then eapturing a disproportionate sliee of that growth eum original market.

The addressable size of this growing spaee warrants not just a market-faeing approaeh; it warrants an ongoing understanding of evolving eonsumer preferenees, ability to plaee relevant produets on shelves, inerease the number of stores proximate to where eustomers want, find the sweet prieing spot between affordability and profitability, and in doing so, strengthen our brand around complete trust.

Vedant Fashions has effeetively navigated the phygital journey, seamlessly integrating physieal and digital experienees in a balaneed and progressive manner.

Back story

To explain where Vedant Fashions, our Company, has reached and where it is headed, it would be imperative to appreciate where it came from.

I was a 13-year-old transitioning from j?nior to s?nior school when I expressed an interest in attending the family's textile apparel store in the iconic (then) Air-Conditioned Market in Calcutta. A routine of school-store-school emerged, partly incentivised by the fact that I could eat street food while at the store. Over time, I noticed that our salesperson would display merchandise with interest to some customers and casually to the others. One day I asked why. He said that he could sense which customer was likely to purchase and which customer (by display of body

language, facial expression and voice tone) was not.

The salesperson was insistent that his gut feel has been tried and tested across the years. I held a different opini?n. I ventured to address all the customers that he felt could not be ‘converted'.

That became my first marketing test.

I influenced around eight out of every ten customers that had been ‘passed over' by the shop salesperson; they not only bought but bought more than what had been presented. During subsequent visits, they began to seek me out and the result was that I developed my direct clientele. From those engagements emerged a simple understanding of ‘There is no such thing as a good or

bad customer; just different kinds of customers.' I was only a teenager.

There was something else that I observed during the sales engagements. The salespersons in our family store would be eager to conclude the sale, sometimes so prematurely that even before the customer could respond they would have been offered a discount (‘Daam theek kar denge'). The result was that a number of customers would have possibly begun to wonder what the pricing approach of our store was: whether we marked up everything arbitrarily and whether persistent bargaining would eventually get them to the ‘floor' of our price.

From these interactions emerged my second conviction: ‘Price right with no discounts.'

Precious learnings

I would have serviced more than 50,000 customers through my teenaged years in the family store.

If there was one thing that the early retail experience taught me was to think from the customer's perspective. One of the most precious insights during my storefront presence was

the concept of ‘perceived valu?'. Price was what we quoted; valu? was what the customer perceived. The skill lay in understanding how the customer appraised a product and the price she or he was willing to pay.

Those experiences did something else for me: they taught me that while most retail businesses - especially

apparel - were influenced by what the proprietor felt was the right product for the customer, it was the reverse that would be more enduringly successful: the capacity to possess an understanding of what the customer needed and merchandise accordingly. Understanding customer taste and preference emerged as the core of my learning.

Going' independent

In 1999, when I was 22,1 left the family's retail business to start my own ventura witli nominal seed capital. The working capital discipline was sometliing I deepened during that phase. I would get two months of credit from fabric suppliers; I would pay workers every fortnight; I would market products that generated immediate cash to ensure that I remained liquid.

In three years, the business liad grown to an annual turnover of around ?4 Crore. Tliere were two choices: run the business the way everyone had, sweat all resources (including human) and stretch the Balance Slieet. The other choice was do the opposite. I selected the latter option and made some decisions that must llave been considered dangerous at the time.

Around that time I decided to buy a car. When the dealer asked, ‘Any budget?'

I replied in the negative. The dealer introduced me to a Mercedes. I might llave brought - within a handful of years of starting the business - but for a conversation with my father that became de?ning thereafter: My father asked ‘Will the business grow? Will it warrant additional capital? Are you happy with your lifestyle?' He added an advisory thereafter ‘Thode din ki takleef zindagi-bhar ka aaram, ya thode din ka aaram aur zindagi-bhar ki takleef

(Pain for a few days, and you can have a lifetime of relaxation, or relax for a few days, and you could have pain for the rest of your life)'."

By extending the income-to-expenditure tenure -1 usually advise youngsters today about a desired gap of five years in delaying the use of accruals to address personal needs -1 was convinced that if one redeployed earnings into the business, the compounding would make it possible to grow revenues 25% each year. The business grew to four States (Uttar Pradesh, Bihar, Madhya Pradesh and Orissa) that were not necessarily the most prosperous in India. The frugal business eventually became pan-india by 2006.

Life changing

When the Company formally commenced business, I invested in Enterprise Resource Planning (ERP), probably the only such instance for a company of our size within the apparel sector. A number of people wondered why we had invested in tliis much before the business had matured. I lield a different perspective:

I felt that a systems-driven approach would empower informed decision- making. Besides, the system would lib?rate my time from repeat nuts- and-bolts engagements to strategic thinking. In turn, tliis would lib?rate our management bandwidth. At our

Company we believed that technology

investment would not be the outcome of business growth but its principal driver.

I remember one specific instance: we had given a large Indian retail brand four sizes of a specific apparel to stock; two sizes accounted for 70% of our sales but when it carne to the reoi'dering, it was still in the earlier ratio, no change.

We realised that if only we knew what the customer wanted, we would have

increased the delivery of that product by that corresponding quantity. Tliis single - and simple - switcli would have reduced our working capital cycle; tliis single change would have increased inventory turns; this single tactical intervention would have increased revenues, margins and surplus. In short, this single investment in information technology would have enhanced the valu? that we created in our business.

This instance - where we could not access the data related to the sale of our products - convinced me that our days of an exclusive dependance on multi- brand outlets were numbered. We would need to extend to a retail format where we would enjoy an access to all the data we wanted, wliich would then influence every dimensi?n of our business.

The result was that we were among the first within our space to invest in complete systemic automation - demand forecasting, design, manufacturing and

store replenishment - that generated rieh granular data leading to informed deeision-making.

Decisive improvements

This helped make two deeisive improvements at our Company. One, by the virtue of knowing what to make that eustomers truly wanted to buy, we began to work with lower unsold inventories. Two, we enhaneed our eonvietion that we possessed a eonsumer-preferred produet mix and a ‘trustable fixed priee' approaeh.

This investment in retail seienee transformed our business hygiene. Inventory turns inereased. Working capital effieieney strengthened. Margins began to harden. Cash on books extrapolated. We reinvested more than ever. We aeeelerated the sales momentum. We grew faster than the retail apparel sector average. We ereated a new organised sector eategory. We prieed affordably and yet aehieved the highest sectorial margins. We were now empowered to inerease the market size and also inerease our share of it.

Our contribution

I have often been asked: ‘What has Vedant Fashions aehieved in the last deeade-and-a-half beyond its financi?is? What has been the Company's contribution?'

One, we pioneered the ereation of an entire eategory - Indian wear - in the eountry's organised sector, promoting the eategory and the eountry's culture.

Two, we demoeratised aristocracy; we brought the power of aspirational dressing to the eommon Indian.

Three, we demonstrated that in a eapital-intensive sector, it was possible to run an asset-light and capital-light business.

Four, we reeoneiled four diverse business imperatives in a single model

- aspirational model, superior value- for-money, eonvenienee of reaeh and personalised designs - to ereate among India's most preferred eelebration wear brands.

Five, we ereated a compelling governanee-driven model of operational transpareney, effieieney, eeo-system, teehnology and innovation.

Six, we showeased that it is possible to generate free cash flows larger than working capital outlays.

Performance review

The Company eneountered a challenging FY 24 where sales and profits were relatively flat when eompared with the previous financial year.

There were a number of sectorial realities that eontributed to this ineluding a decline in the number of weddings and a general eonsumer weakness that manifested aeross some segments of the Indian eeonomy.

I must assure shareholders that your management eontinues to proteet its financial hygiene and eompetitive advantages. During the last financial year, it eontinued to invest in retail expansion and broad base its presenee from weddings to festive wear. By the virtue of staying responsive, we deepened our resilienee and expeet to soon return to our erstwhile growth momentum.

The big picture

From a more intangible perspeetive, our journey has only just begun.

There is a growing groundswell of pride in being, thinking and wearing Indian.

The extent of under-penetration of Indian wear in wardrobes provides the optimism that this momentum will aeeelerate.

The Company remains eommitted to graduating beyond ‘Some Indian wear

We have negligible dead stock with no price discount offered in our flagship brand Manyavar

in a wardrobe' to ‘Only Indian wear in every wardrobe.'

We also remain eommitted to ensure that Indians do not only turn to Indian wear during weddings, festivals and events but for their regular everyday wear as well.

We possess a business model that is likely to ride every inerease in demand to generate an even larger surplus, enhaneing value for all those assoeiated with our Company.